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Cookies are basically little data packets accessed by your browser to a server you've loaded and can do things like save your login fields and remember data you've inputted previously. It's just a text file that is sent everytime you load a page on a website and it can be stored for later use and be used to recognize individual users of site and keep their personalization options saved. I'm probably simplifying it, but it's just what I've gathered from random people asking around the web over the years.

You don't... install them. You can usually opt out of using them on websites and I think this is what kirby meant .~.

If you can go onto PD without having to login everytime, you are using a cookie.

cookies aren't a text file... they're bits of date (usually in hex form); where the values represent you, where you've navigated in the site, or what you have in your shopping cart. but pretty much what pichubro said.
cookies just track who you are and what you're doing on the site... usually.

and there sent automatically. the server saves them for the time you're on a site.

OK! so this is how it works when you open firefox/chrome to visit PD forums:

1. the search:
IP magic happens here. Your computer sends a message to the entire world asking "who knows where 'pokedream.com/forums' is at?" and host servers around the world will respond with "I don't" until one of them says "I do!"
to save time, a system was created and we have 13 Root name servers that the whole entire internet communicates with (they're replicated to save time), but they are your main servers that your ISP DNS servers check with.

2. the trusted connection:
once connected, you have to authenticate with the server hosting pokedream. this gets complicated with certificates.
ok, story, a company created the certificate system and now monopolized on it. they are the main people. microsoft trust their certs. so when going to a website and asks to you to trust their certificates, it's pretty much your computer saying since microsoft trusts them, i'll trust them too! :]

pokedream is on a server that trust someone else that someone else of someone else trust microsoft, so because of that, your computer accepts to trust that server.

All this is happening when your web page is fucking loading, all withing milliseconds, this information is traveling across the Atlantic and pacific ocean... so deal with the load ;]

3.Now that a connection is made, you session will begin, your computer will send cookies to the hosting server about your personal info and other whatnot stuff.
the hosting server will save them (if you click, keep me logged in, the time stamp expiration will be changed to reflect that) and it will keep you logged in.
if you tell your browser not to save the cookies, the hosting server will automatically drop them and end your session. when the hosting server does that varies to each server and how they were set up to handle sessions. PD forums seems to be every 10-15 minutes. some do it as quickly as every 5 minutes. :\

4.Normally, when you close your browser, your cookies won't be saved. but Firefox and chrome ask if you want to save your cookies (which a cached in memory for future use) and the hosting server drops your cookies.
when you reconnect, your web browser will "remind" the hosting server that you're suppose to be automatically logged in... so it will. your web browser will send ALL the cookies saved on your web browser to the hosting server until it recognizes any that pertain to it... making loading longer.

this is also dangerous because malicious users like to look through those cookies and see what other websites you've been visiting and if you set automatic logins. that's why many bank websites don't have the auto login feature anymore and they also delete all cookies when you end your session.